Weston Foods bids on cookie company

Weston Foods, sister company to Brampton-based grocery giant Loblaw Companies Ltd., has put in a bid for Colonial Cookies, a troubled Kitchener cookie maker that went into receivership in January.

The baked goods company has offered $13.5 million in cash, including a deposit of $1 million, for Colonial’s property and assets, according to a report from PricewaterhouseCoopers, Colonial’s receiver.

Weston’s bid is a stalking horse bid, meaning it is an initial bid that establishes a minimum price for the assets in order to keep low-ball offers off the table. Once a stalking horse bid is made, other potential buyers can submit competing bids.

Weston Foods Canada Inc. is a subsidiary of George Weston Ltd. Its operations include the Weston Bakeries bread plant in Kitchener.

It is a sister company to grocery giant Loblaw Companies Ltd., another George Weston subsidiary. Colonial made private label cookies, including President’s Choice cookies for Loblaws.

PricewaterhouseCoopers noted in its report that Weston is familiar with the industry and Colonial’s operations.

It said Weston’s bid establishes a template for other potential bidders and establishes a baseline that gives creditors some certainty. The receiver has set a deadline of Feb. 11 for offers for Colonial’s assets.

Under the agreement with the receiver, Weston would assume Colonial’s collective agreement with the United Food and Commercial Workers Local 175, the union that represents Colonial’s workers, subject to the condition that Weston negotiates a new contract or amended agreement with the union.

Weston may also need to get approval for the purchase under the Competition Act for the stalking horse transaction, the receiver’s report said.

Colonial employed 370 people, including more than 320 unionized workers.

The Otonabee Drive plant has not produced cookies since before the annual Christmas shutdown in December. Production was supposed to resume in early January, but workers were not recalled and the company was placed in receivership on Jan. 19.

According to PricewaterhouseCoopers, Colonial incurred a net loss of $6.8 million in fiscal 2010, and owes about $5.8 million to its main lender, Kitchener Colonial Holdings Inc., and about $10.1 million to unsecured creditors.

It also owes about $747,000 in accrued vacation pay for employees and about $950,000 in pension plan obligations.

The receiver said Colonial’s operating results deteriorated last year due to a number of factors, including higher raw materials costs and unscheduled production shutdowns caused because the company didn’t have cash to operate.